Success in public-spending cuts turns to hurdle in Japan quake rebuilding

Success in public-spending cuts turns to hurdle in Japan quake rebuilding After years of criticism for public- works spending that rewarded political constituents at the cost of adding debt, Japan succeeded in cutting the largesse in half. Politics posed a challenge. Volume of Wreckage Politicians have also pushed the central bank to inject more stimulus, with Noda saying in January he expected the Bank of Japan (8301) to take "bold" actions. The sheer size of the recovery task is another issue. While some 220 communities damaged by the tsunami plan to move residential areas to higher ground, only a dozen have so far succeeded in reaching a consensus among residents needed before work can begin, according to the Land Ministry. Mizuho Research Institute estimates that demand from post- quake recovery efforts will add about 1 percentage point to gross domestic product in the fiscal year starting April 1. 'Pushed Back' "We expect reconstruction investment will emerge and begin to boost the economy during the current quarter," said Yasuo Yamamoto, a senior economist at the Mizuho institute in Tokyo. Noda's Democratic Party of Japan continued the effort after taking power in 2009, cutting budgets for roads, bridges and community halls under the slogan "spending for people, not concrete. Even so, almost half of the funds earmarked through three extra budgets for the rebuilding efforts remained unassigned to any projects as of Jan. Sendai, where the airport was wrecked by the post-quake tsunami on March 11, has 14 ready-mix cement factories, compared with 30 in 1998. "There will be a huge difference, psychologically -- the speed and timing really matters in disaster reconstruction," Makabe, a professor of economics at Shinshu University in central Japan, said in an interview. Finance Minister Jun Azumi said on Saturday in Tokyo that he expects "good signs" for the economy toward spring. In Sendai, the largest city in the Tohoku region and capital of Miyagi prefecture, the remaining 14 cement factories have about seven trucks each to service them, when they once had 15 vehicles a piece, according to Yoshiharu Chiba, president of Atsumi Construction Co. Tokyo bureaucrats have tried to assist clear the delays, with the finance ministry's budget bureau seconding 10 officials to the northeast to speed subsidy applications, according to the ministry. Eighty-four percent of the 1. "Everything is scarce at the moment and that's driving up the cost of construction. A delay in quake spending has already weighed on the world's third-largest economy, which contracted in the fourth quarter. Miyagi, an area about the size of Delaware, saw about a third of its public-works projects go without bidders in January, compared with an average of seven percent in 2010, according to the Land Ministry. "Reconstruction demand, currently one of the few hopes for economic growth and expected to raise this year's growth by 1 percentage point, may not emerge as strong as expected," said Hiroshi Watanabe, a senior economist in Tokyo at SMBC Nikko Securities, a unit of Japan's second-biggest bank by market value. Japan has halved annual outlays on public works in the past decade to 6. Former Prime Minister Junichiro Koizumi led the charge as he capped sales of new debt. Success in public-spending cuts turns to hurdle in Japan quake rebuilding Trade News selected by Local Linkup on 11/03/2012